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One in five freelancers could quit self-employment

10 November 2020

After two decades of growth in UK self-employment, a new study by the London School of Economics has found that one in five freelancers consider it likely that they'll leave self-employment as a result of the coronavirus crisis.

The research, undertaken by the Centre for Economic Performance at the London School of Economics (LSE), found that the easing of pandemic restrictions over the summer only had a marginal effect on the self-employed, with 58% saying they had less work than usual in August 2020.

The LSE report - COVID-19 and the Self-Employed: Six Months into the Crisis - has found that even after England's first lockdown lifted, 32% of self-employed workers had fewer than 10 hours of work a week in August.

Self-employed workers who operate through digital apps in the gig economy have had more work, according to the LSE report. However, 78% of these workers - including parcel delivery workers and private hire drivers - said they felt their health was at risk while working.

Other key findings include:

  • 28% of respondents had applied for a second grant under the Self-Employment Income Support Scheme (SEISS);
  • Of those who had not applied for either the first or second rounds of the SEISS grant, 38% were not sure of their eligibility;
  • A third of respondents think normal activity will not resume until after February 2021;
  • One in ten think it will never resume.

Of most concern is that 20% of freelancers polled said they "consider it likely" that they'll leave self-employment as a result of the crisis - this rises to 59% among those aged under 25. The newly self-employed are more than twice as likely to report having trouble with basic expenses when compared to other self-employed workers (52% versus 24%).

Stephen Machin, co-author and CEP director, said: "While the growth in self-employment has been one of the key trends in the labour market in the past two decades, there are now early signals that this trend could be set to reverse.

"By the summer, there had already been a sharp fall in the number of self-employed workers - this may be primarily due to the lockdown, but for some it will be due to realising the risks of self-employment. The COVID-19 crisis has vividly illustrated the social insurance available to different types of workers, with many experiencing the basic safety net of Universal Credit for the first time."

According to the Association of Independent Professionals and the Self-Employed (IPSE), "glaring gaps in support" are leading to "long-term, avoidable decline" in the self-employment sector.

The latest data from the Office for National Statistics (ONS) shows that the number of self-employed workers in the UK has already fallen to 4.53 million, down from 5.1 million at the end of 2019.

Derek Cribb, IPSE ceo, said: "After the 2008 financial crisis, it was rising self-employed numbers that kept unemployment comparatively low - as uncertain employers looked for more flexible expertise instead of permanent employees. Now, this does not appear to be happening and the self-employed sector is in precipitous decline. Some self-employed are finding their way into full-time roles, but many others are joining the record flow into unemployment.

"Government must work quickly to stem this flow by urgently getting support to the left-behind self-employed groups. Extending support would be a cost now, yes, but it would be a temporary cost during the pandemic, to hold back an even worse unemployment problem later."

Written by Rachel Miller.

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